Triasima Canadian Small Capitalization Equity Fund Commentary – Q3 2025

The economy

Economies worldwide were on an uncertain path during the third quarter of 2025. In the United States, consumer spending remains resilient, especially among higher income households. Large corporate investments, most notably in artificial intelligence and its supporting supply chain, stimulate overall growth. At the same time, a deteriorating labour market, and tariffs and trade disruptions are weighing on the outlook. These themes are also present in the Eurozone, China, and in Canada.

While still considering inflation, central banks shifted their focus towards labour market risks. Both the Federal Reserve and the Bank of Canada cut their overnight rates by 0.25% in September, signaling a tilt toward supporting growth and employment. 

Canada’s second-quarter GDP contracted on the back of a sharp decline in exports, and the softness is increasingly evident in the labour market. China faces growing youth unemployment and, like Canada, is also buffeted by the trade war. 

Business activity accelerated from a low level in the Eurozone but is expected to remain weak heading into 2026. Germany, its largest economy, is supported by growing defense and infrastructure spending.

The Canadian small capitalization equity market

The S&P/TSX SmallCap Index had a 20.9% return this quarter.

It was a speculative market with the style factors beta and price volatility leading.

The Materials sector (41%) was driven by strength in the gold producers, itself propelled by the weak US dollar and growing American fiscal deficits. The Energy sector (19%) rallied due to uranium explorers, while Health Care (20%) was supported by strength in cannabis stocks. 

Conversely, the defensive Communication Services (-4%) and Utilities (-7%) sectors lagged. 

The Fund

The Triasima Canadian Small Capitalization Equity Fund had a 19.1% return this quarter.

The underperformance came from both allocation and security selection. The underweight position in the Materials sector and the cash reserve were the biggest culprits. In security selection, the added value in the Materials and Industrials sectors was offset by relative weakness in the Energy, Health Care, Financials and Information Technology sectors. 

The table presents the top and bottom contributors to the relative performance:

*Securities not held in the fund.

Turnover focused on adding further to both gold and copper producers, bringing the Materials sector to an overweight position. As a result, the cash reserve was meaningfully reduced. 

The Three-Pillar Approach ™

On the quantitative side, the Fund continues to have superior revenue growth, and expectations and risk metrics than the benchmark. Valuation parameters indicate the Fund’s holdings are more expensive.

The Canadian small capitalization equity market was in as strong uninterrupted uptrend in the quarter and routinely set new all-time highs. 

The fundamental background to Canadian equities rebounded somewhat following the deterioration of the first half of 2025. Earnings keep on growing, interest rates are stable, and sentiment regarding the negative impact of American tariffs has improved.  

Legal notices

The posted rate of return is a historical total rate of return compounded annually, except for periods of less than one year, which are not annualized. The rate of return shown takes into account fluctuations in unitholder value and the reinvestment of distributions. The posted rate of return does not take into account investment management fees and income taxes payable by the unitholder, which would have the effect of reducing the return. The Funds are not guaranteed, their value fluctuates, and past performance is not indicative of future results.

Data on the FTSE Canada 91 Day T-Bill, FTSE Canada Short Term Bond and FTSE Canada Universal Bond reference indices are provided by FTSE Global Debt Capital Markets Inc.  (“FTSE”). Data on the S&P/TSX Income Trust, S&P/TSX Preferred Share, S&P/TSX SmallCap, and S&P/TSX Composite reference indices are provided by TSX Inc. (“TSX”). Data on the S&P 500® Index are provided by Standard & Poor’s Financial Services LLC (“S&P”). Data on the MSCI EAFE, All Country World, and World reference indices are provided by Morgan Stanley Capital International Inc. (“MSCI”). Lastly, the classification of securities according to the Global Industry Classification Standards (“GICS”) is provided jointly by MSCI and S&P. (FTSE, TSX, S&P, and MSCI are hereafter collectively referred to as “indices and data providers”.) 

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